K-eco head says tax reforms will help achieve carbon neutrality
Ahn Byung-ok, chairman and CEO of Korea Environment Corporation (K-eco), stressed the importance of tax reforms to help incentivize companies to reduce greenhouse gas emissions as the country works to achieve carbon neutrality.
The 59-year-old environmental expert was inaugurated as the fifth head of K-eco on Dec. 31 for a three-year term. He said he will work toward the agency’s efforts to lead Korea’s carbon neutrality movement and digital transformation.
“In order to achieve carbon neutrality, I believe there is a need for major tax reforms,” Ahn said as he sat down for an interview with the Korea JoongAng Daily on March 21, ahead of his 100th day in office which fell on Sunday. “The way to speed along the path to net-zero is by putting a price on carbon. When a price tag is put on carbon emissions, companies start actively looking into ways to reduce emissions.”
He added that the government in turn needs to provide tax incentives to motivate companies to reduce greenhouse gas emissions and “balance out” carbon pricing measures.
K-eco is a quasi-government environmental services organization under the Ministry of Environment founded in 2010 that aims to effectively operate greenhouse gas reduction programs, improve the environment, facilitate resource management and respond to climate change.
Ahn previously served as a vice environment minister and as a chairman of the executive management committee of the National Council on Climate and Air Quality. He was also formerly president of Korea's Institute for Climate Change Action and an AI content convergence professor at Hoseo University.
Ahn said he doesn’t expect there to be any major changes in terms of environmental policies under the new Yoon Suk-yeol government, since areas like climate change are universal issues.
But President-elect Yoon in his campaign has also indicated a shift away from the Moon Jae-in government’s nuclear phase-out policy. Yoon has pledged to use nuclear power generation to reduce carbon emissions and Korea’s foreign dependence for energy and promised to continue to operate current nuclear reactors, so long as their safety is assured.
Ahn said there could be “some speed control” in terms of the phasing out of nuclear reactors under the incoming government, while stressing the importance of continuing to seek out renewable energy sources.
The European Union is pushing ahead with its carbon border adjustment mechanism (CBAM), or a tariff on imported goods based on their carbon content. CBAM will require European importers to buy digital certificates that would cover the carbon content of their imports in certain sectors.
Ahn noted that Europe’s CBAM could pose some “problems” for Korea, a major exporter country. But he said that Korean industries are better poised for the CBAM system because its greenhouse gas emissions trading scheme (ETS) is similar to that of the European Union.
A native of Suncheon in South Jeolla, Ahn received his bachelor’s and master’s degrees in oceanography at Seoul National University and received a doctorate degree on applied ecology at Germany’s University of Duisburg-Essen.
The following are edited excerpts of the interview.
Q. It’s been nearly 100 days since you became chairman of K-eco. What are your initial thoughts? What has been your major task so far?
A. K-eco is Korea’s sole comprehensive environmental service agency. It handles a lot of measures involved directly with carbon neutrality. As you know, carbon neutrality is not something that just Korea, or just K-eco, considers important, but a milestone set on the global level through the Paris Agreement [on climate change] and the new system following that. I believe that carbon neutrality and digital transformation will come hailing in. I view K-eco as a ship, and getting past this hailstorm without sinking is the task at hand. The role of the chairman is the captain of the ship. But on a ship, there is also the helmsman, the crew members and the passengers, and it is the captain’s role to set the direction, in this case to enable carbon neutrality and a digital transformation.
The past three months have been a period of getting to know K-eco. This has been a time to look into the agency’s full potential and strengths, and also to examine the reason why such endeavors aren’t fully blossoming. I have also visited around half of our regional branches and was reminded that K-eco is indeed the agency working on the front lines of environmental policies.
K-eco was founded in 2010 as the largest comprehensive environmental agency in Korea. What is its main role, and how do its tasks differ from those of the Ministry of Environment?
A body needs many organs to function, and the Environment Ministry can be seen as the heart, while K-eco can be seen as the arms and legs. But nowadays, K-eco has been playing a more and more important role in environmental policy, even functioning as the brain at times. Reducing greenhouse gas emissions is the most important aspect in achieving carbon neutrality, and around 75 percent of emissions are from the industrial sector. The Act on Allocation and Trading of Greenhouse Gas Emission Allowances was implemented in 2015 to enable industries to remain competitive while still reducing emissions, and since then, K-eco has played the most critical role in the important task of allocation. Last year, the Framework Act on Carbon Neutrality and Green Growth was passed, and new measures will be introduced, such as a climate response fund. The government will support industries with a 2.5-trillion-won [$2 billion] climate response fund annually and invest in facilities and technologies for carbon neutrality.
The local government’s role is also important. Setting budgets from a carbon neutrality perspective filters out projects that may otherwise be promising but be a burden in terms of greenhouse gas emissions. Thus, K-eco also monitors the new Greenhouse Gas Reduction Cognitive Budget System [which analyzes the impact of government plans on greenhouse gas reduction when national funds are set up].
You have been a proponent of carbon incentives in order to better engage the green growth of companies and the private sector. Can you elaborate?
In order to achieve carbon neutrality, I believe there is a need for major tax reforms. That is because in a capitalistic economy, the way to speed along the path to net-zero is putting a price on carbon. When a price tag is put on carbon emissions, companies start actively looking into ways to reduce emissions. Many countries have adopted carbon pricing, namely greenhouse gas ETS or carbon taxes, or both. Korea has already implemented an ETS, and the government looks to be actively reviewing introducing a carbon tax.
Even if introducing a carbon tax is inevitable, the problem is that putting a price on carbon can also bring about many side effects. Industries with high carbon emissions could consequently see an immense increase in expenditure. From a company's perspective, their price competitiveness will go down. Hence, they will be discouraged in making capital investments in efforts toward green growth and carbon neutrality, because it is costly and could put too much of a burden on the company and threaten its competitiveness and survival. That is why we need to help lift such a burden.
On the one hand, carbon pricing should guide companies to reduce pollutants and greenhouse gas emissions, while the government simultaneously needs to provide incentives to motivate such emissions reductions. That’s what carbon tax reform is about, to balance such a burden. There needs to be a grand design in tax reforms, such as reducing corporate tax for companies or income tax for individuals. In return for putting a greater price on environmental pollution, as producing pollutants and greenhouse gases is a bad thing, it is only right to decrease taxes as much as possible to encourage business and corporate activities. When there is such balance, our industries will be able to speed along the path to carbon neutrality.
The European Union appears to be ahead of the game in terms of carbon neutrality policies. Are there any carbon-related policies Korea should be keeping an eye on?
Europe doesn’t separate environment and economy as individual fields. They don’t view environment and economy as colliding, but rather, think of it as one. In other words, the EU believes properly considering the environment and making appropriate investments is also economically beneficial. In the past, such a thought was prevalent only in the EU, but now, global financial institutions and investors are also heading in that direction. It is currently difficult to separate the task of achieving carbon neutrality from trade and financial regulations. Companies that do not consider the environment will find it difficult to be competitive in a global market.
Likewise, the EU under the European Green Deal pledged 1 trillion euros [$1 trillion] in sustainable investments over the next decade to aid in this. The European Commission called the Green Deal a policy to not only prevent climate change but simultaneously a new industrial strategy. That is why measures such as the CBAM also came about. From the perspective of EU policymakers, if only European companies work toward greenhouse gas emission reductions and other countries lag behind, then climate response on a global level will not be effective. Also, it will be unfair to European companies who will be competing on an uneven playing field in terms of trade and commerce because of carbon pricing.
Should Korean industries be worried about the CBAM?
The CBAM is expected to enter into force next year. It could be a problem for Korea, a country that is heavily reliant on exports. After the EU, I believe the United States could also implement a carbon border tax system at any time. But relatively speaking, Korean companies are in a better position to deal with Europe’s CBAM because we already implemented an emissions trading scheme. The Korean ETS somewhat benchmarked the EU ETS, and from Europe’s perspective, Korea also has similar institutional conditions requiring greenhouse gas emission reductions, which is advantageous for us. Nonetheless, the standards may not be up to par with EU levels. Thus, while not necessarily in the most disadvantageous position compared to other countries, Korean companies are urgently reviewing how CBAM will be implemented and how they will be impacted.
Do you expect any major changes in environmental policy with the incoming Yoon Suk-yeol government? Do you have any recommendations on what should be a key focus for the incoming administration, and what will K-eco’s role be in fulfilling this?
There is a chance that there might be a shift in energy policy, especially in regard to nuclear power plants, but I believe there won’t be any major change in traditional environmental issues such as air pollution, climate change, water, waste recycling and preserving the ecosystem. Compared to other fields, there is little room for environmental policy to change because of differences in policy positions.
We have spent over two difficult years because of the Covid-19 pandemic. Covid-19 has also been difficult for the environment, due to factors such as the increase of single-use plastic waste because of food deliveries. Returning to daily lives in the post-coronavirus era is not just limited to the economic sector and people-to-people exchanges. I see that the delicate relationship between human society and the natural environment has also been upset by Covid-19. Environmental policy is important in the process of restoring this relationship. That is why I believe that the new administration will also more actively push for environmental policies, and in that case, K-eco is also ready to serve as its arms and legs. I believe resource circulation may play an especially important role.
Likewise, reducing greenhouse gas emissions by 40 percent, from the country’s peak in 2018, by 2030 is another urgent task at our feet. The new administration’s term is until 2027, but the international community regularly reviews the progress and puts pressure on countries. Thus, the new government will have to consider how to reach the emissions reduction targets by 2030. In turn, as K-eco manages policies to help reach the nationally determined contributions [NDC] target, we will work harder to make sure that such measures run efficiently.
You mentioned that the new government may turn away from the current nuclear phase-out policy?
While we have called it a nuclear-free policy, under the current plans, nuclear reactors will continue operating through 2080. Safety is essential for nuclear power plants. The idea is to decrease nuclear reactors taking into consideration safety. I believe there could be some speed control [under the new government]. In terms of climate change response, while renewable energy sources may be obtained quicker than expected, we also need to take into consideration alternatives if that is not the case. The new government may consider nuclear power as one such alternative.
Can you explain your digital transformation vision mentioned in your inauguration speech?
In the fourth industrial revolution era, the speed of advances in digital technologies is much quicker than expected. But such digital technologies, like a double-edged sword, can take away jobs from some people and create new jobs for others. Currently, it is predicted that there will be more jobs disappearing than new ones being created. But if you flip this, digital transformation means we can also work more efficiently. For repetitive jobs, we can use these technologies, while using human resources for more productive, innovative fields to prepare for the future. Many of K-eco’s projects can employ digital technologies, for example compiling data on the level of water and air pollution or resource circulation. If data is compiled efficiently, it could also be potentially used for future projects and shared with the public.
You have worked toward combatting the fine dust problem over the years. How do you diagnose this issue, and do you have any recommendations on how to improve the air quality situation?
We have implemented the fine dust seasonal management system [a government measure to reduce fine dust particles through the banning of Grade 5 emission vehicles and a reduction in the operation of coal-fired power stations] for four months between December and March the following year since winter 2019. Some people think that the fine dust level has decreased because of the Covid-19 situation, and from March to December 2020, there was some impact due to global coronavirus lockdowns. Compared to previous years, May and June in 2020 saw a decrease in fine dust levels, but by November and December that year, industries and traffic were back to regular operation levels with high expectations for economic recovery. So if we were to say that the fine dust levels improved purely because of Covid-19, then the situation in winter 2021 and this winter should have been bad too, but that was not the case.
I believe the biggest factor is atmospheric conditions, which can diffuse domestic and overseas fine dust levels. The seasonal management system is also a very strong measure. I think the people underestimate their role in reducing fine dust levels. With domestic and overseas fine dust levels reduced and if the atmospheric condition remains similar, I believe we will see the trend of a continued improvement in air quality. But we still have a long way to go, compared to fine dust levels in major cities like London or Tokyo.
Korea said it is ready to share its experiences and know-how for carbon neutrality with developing nations. Do you have any key K-eco projects you would like to recommend?
There are many areas of cooperation in terms of carbon neutrality policies and our environmental infrastructures, such as our water treatment plants, waterworks, incinerators, landfills and recycling centers. That is because Korea has a history of transitioning from a developing country and has experienced air pollution and water pollution. K-eco has unique know-how in terms of constructing, managing and operating basic environmental infrastructures aimed at reducing pollutants. Developing nations also want to advance their economics while reducing pollutants, so I believe that we have an obligation to share our technologies in these areas with our neighboring countries.
What is your biggest goal during your tenure as K-eco chief?
K-eco is a public institution that is a quasi-government agency. Out of public institutions, it has the largest responsibly and role on environment issues. I hope K-eco can take place as an agency that leads in carbon neutrality measures, acknowledged by the public, leveraged by carbon neutrality targets, digital transformation and ESG [environmental, social, and governance]. At a global level, we need to become an agency that is recognized for offering high-quality environmental services.
BY SARAH KIM [firstname.lastname@example.org]